The Cosmos community has approved a vote to add “replica security (RS)” to the chain, with 99.99% of votes supporting the move. The most awaited update is set to go live on March 15, 2023, with the v9-Lamba upgrade.
RS is the first version of Cosmos’ Interchain Security (ICS) feature, allowing blockchains in the Cosmos ecosystem to share validation sources for better security.
Only protocols approved by the Cosmos government will be added as consumer chains in future updates. Eight consumer chains are potential candidates for selection, including Neutron, PolymerDAO, Duality, Stride, Simply Staking, FairBlock and Comdex.
Cosmos interchain security can start a cycle of good real results
The Replicated Security feature will distribute up to 25% of consumer chain fees to Cosmos Hub stakers. The protocol can also provide part of token inflation and revenue stream to Cosmos (ATOM) stakers.
The implementation of ICS allows the consumer chain to focus on the economic growth of the network, as the Cosmos Hub validator provides reliable security against 51% attacks and double spending. This will generate additional revenue for ATOM stakers and allow the consumer chain to maximize growth.
The staking reward for ATOM after adjusting for inflation is 6.82%, with an annual return of 24.37%. Additional consumer chain revenue will increase the annual revenue of ATOM owners, encouraging more purchasing and staking activities.
Neutron is a smart contract platform that will be the first consumer chain to use the new ICS features. Avril Dutheil, general manager of Neutron, told Cointelegraph:
“As a result [of RS]Neutron does not have to continuously expand the supply of Neutron (NTRN) to keep validators honest or pay staking results to governance participants because they do not contribute to securing the network.
Dutheil added, “However, NTRN can have a fixed supply, a release schedule indexed to on-chain activity and constant buy-and-burn pressure from Neutron’s three revenue streams.”
This will allow the consumer chain to focus on the actual results of the block and bring additional results to ATOM stakers when the price increases. Consequently, the high yield for ATOM staking will motivate more users to buy and share ATOM. Therefore, it can lead to a good investment cycle in the Cosmos ecosystem.
The growth of the Bullish Cosmos ecosystem is evident
The Cosmos ecosystem has grown significantly over the past two years as more and more chains use the Cosmos-SDK and Tendermint consensus mechanisms to rotate application chains. Implementing better cross-chain features like RS will allow blockchains to benefit from the liquidity in the Cosmos ecosystem.
Circle’s announcement of a native USD Coin (USDC) blockchain on Cosmos will be a powerful catalyst for increasing ecosystem liquidity. Dutheil mentioned several decentralized stablecoin projects like Agoric’s Inter Stable Token (IST) and Kujira’s USK, which look to replicate the success of the Ethereum-based decentralized stablecoin Cosmos. This will also help establish ATOM as a reliable guarantee and improve its value proposition. Dutheil added,
“Whether this decentralized alternative succeeds in expanding the offering on Interchain, it is at least a building block to finally bring an integrated DeFi ecosystem to Cosmos.”
Technically, the ATOM/USD pair has formed a bullish ascending triangle pattern since forming the June 2022 bottom at $6. A breakout of the triangle around the $14 and $15 resistance levels could see the asset touch the 2022 bearish breakdown level around $33, with little chance of touching the all-time high around $46. However, the bullish thesis will be invalidated if the price breaks down and falls below the base of the triangle, currently hovering around $10.
CryptoQuant data shows that the ATOM relative strength index and the Stochastic indicator are in the oversold category, indicating a possible trend change.
While the bullish ATOM thesis seems plausible, its realization will depend on usage and whether the consumer chain can generate meaningful results for ATOM stakers.
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